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UPDATE 3-France's Engie to shut Australia's dirtiest power plant

Published 03/11/2016, 05:54 pm
© Reuters.  UPDATE 3-France's Engie to shut Australia's dirtiest power plant
ENGIE
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* Hazelwood supplies up to 5 percent of Australian power market

* Engie puts Loy Yang B, Kwinana power stations up for sale

* Mine rehabilitation to take at least 12 years

* Plant closure to cut about 3 pct of Australia's CO2 emissions (Adds Mitsui comment)

By Sonali Paul

MELBOURNE, Nov 3 (Reuters) - France's Engie ENGIE.PA said it will close Australia's dirtiest coal-fired power station in March 2017 as further investments in the ageing Hazelwood plant cannot be justified, and will look to sell two other Australian power plants.

The long-anticipated move to close Hazelwood is the latest in a string of closures of coal-fired power stations in Australia amid a push toward cleaner energy and a drop in demand that has driven down electricity prices.

"We have now reached the point where it is no longer economic to operate," Engie's Australian Chief Executive Alex Keisser said in a statement.

Engie said it had considered a range of options to revamp the 52-year-old power station in southern Victoria state, including refueling it with natural gas, but that would have cost the company hundreds of millions of dollars.

"Unfortunately, the power price today in Australia didn't make these options viable," Keisser told reporters.

Engie said it was also putting its Loy Yang B coal-fired plant in Victoria and its Kwinana gas-fired plant in Western Australia up for sale as part of an effort to get out of fossil fuel-fired power.

Hazelwood, Loy Yang B and Kwinana are all co-owned by Japan's Mitsui 8031.T , which said in an emailed statement that it was also considering selling its stakes in Loy Yang B and Kwinana.

Kwinana is also 30 percent owned by Thailand's Ratchaburi Electricity Generating Holding RATCH.BK . The company was not immediately available to comment on its plans.

An analyst estimated Loy Yang B, a 953-megawatt plant that is Victoria's newest and most efficient coal-fired generator, could fetch up to A$1.5 billion ($1.15 billion), while Kwinana, a 122-MW plant, could sell for around A$150 million.

SECURITY CONCERNS

The Hazelwood shutdown comes amid concern about secure power supplies following a statewide blackout in September in neighbouring South Australia state, triggered by a freak storm that led to the shutdown of wind farms and an interstate power link.

Hazelwood provides up to 5 percent of electricity for Australia's national market.

Australia's energy and environment minister Josh Frydenberg said he had been reassured by the country's energy market operator that "the reliability of the national electricity market will continue despite the closure of Hazelwood".

"We're not worried about a security issue in Victoria, but we're wary about what it will do with prices," said Andrew Richards, chief executive of the Energy Users Association of Australia, which represents big businesses and industry.

Modeling done for the state government found that retail power prices would rise by about 4 percent with the closure of Hazelwood.

The power station burns brown coal, the dirtiest form of coal, dug from an open pit next to the plant which the company plans to turn into a lake, a process that will take around 12 years, Keisser said.

In its most recent estimate, Engie expected rehabilitation of the mine would cost A$73 million, but Keisser said that it would take around two years to work out a rehabilitation plan and total cost.

That will come on top of the A$150 million in redundancy costs that Engie and Mitsui have agreed to pay the 750 workers losing their jobs.

An independent consultant estimated mine rehabilitation would cost between A$264 million and A$357 million, in a report to the government after a massive fire at the mine in 2014.

Shutting Hazelwood will cut about 3 percent of Australia's greenhouse gas emissions, or about 18 million tonnes a year of carbon dioxide. ($1 = 1.3048 Australian dollars)

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